By Mary Green
Investing is about taking the long view, focusing on what you want in your life and creating a flexible dynamic plan to get there. That said, we’ve been through an exceptional time so I thought it would be useful to put together brief overview. The review is a quick whiz through how the pandemic has affected the markets and the economy in the UK over the last two years and considers what might be next in 2022.
- Remember way back when Corona was still a bottle of beer with a lime wedge stuck in the top?
- Act 1 – the pandemic hits and the markets take a tumble
- Act 2 – the government gives businesses free money and interest rates are super low, which many see as an opportunity to make money in the markets.
- Act 3 – many sectors recover, although some do not notably, travel, aerospace, gas and oil, banking, and insurance.
- Act 4 – the emergence of the super performers – remember when zoom and online shopping suddenly took over the world?
- Investor activity drives asset prices up,
- Crypto becomes the buzzword, Crypto memes anyone?
- Supply chain issues caused by Covid drive the price of wood, food, and commodities sky high.
- Tech companies’ share prices go up and there are whispers about another dot.com bubble
- Mergers and Acquisitions start picking up speed as firms scramble to position themselves competitively in the new economic environment.
- The pandemic – are we bored yet?
- Vaccines and covid treatments are here but so are variants.
- Inflation is rising and the prices in the shops are going up
- Policy actions taken during the pandemic are having a knock-on effect on the economy, which is slowing, and inflated asset prices will see a correction in the markets
- Supply chain issues continue, but will this be the year when the world gets moving again?
- A strong labour market and a higher level of focus on flexible and online working.
- A heightened understanding of the fragile and unpredictable nature of our environment leading to focus on sustainable investment and a longer-term viewpoint.
- Due to a combination of unfavourable circumstances, wholesale gas and electricity prices have increased dramatically. Some of the reasons are high global demand, reduced supply from Russia, Lower solar and wind output and maintenance issues. Renewable energy is likely to be key in improving the situation.
So, what can we learn from my brief review? I think the key take homes to remember are that the markets will always react to the short-term situation and the economy will always cycle through stages of expansion and contraction. However, the facts remain that, over time, these inevitable market dips have given way to higher peaks. It’s why we continue to invest to finance our long-term goals, such as retirement. To be a successful investor you need to think longer term, look at your life goals and invest over time to achieve them. Engage a Financial Planner who will establish which may be the most appropriate and tax efficient investment to match your timeline, goals, appetite for risk and capacity for risk and who will provide realistic assumptions for investment performance.
Investments can and will go up and down in value and you can end up with less than you initially invested.